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As we’ve said before, the integrated oil majors truly are in a league of their own. Responsible for the bulk of the world’s energy production, the group includes some of the largest and most profitable corporations on the planet. Their huge scale provides cost savings and other advantages many smaller firms could only dream of.

So when it comes to figuring out just how the energy sector as a whole is doing, it is important to focus on the group. With the last earnings reports for the quarter now trickling out, we can figure out what took hold last quarter and — more importantly — see where we are headed for Q3.

Lower Oil Prices

If there’s one thing that could sum up the second quarter in the energy sector, it would be lower prices for hydrocarbons. Across the board, the majors felt the one-two punch of falling average oil and natural gas prices throughout the quarter.

Prices for the international benchmark Brent crude declined by more than 7% during the quarter — in stark contrast to the same period last year, when turmoil in North Africa and the Middle East caused a huge spike in oil prices. Analysts peg the average lower Brent prices to dwindling economic activity in Europe and in key emerging markets, like China and India.

At the same time, the hydraulic fracking and shale revolution is continuing to wreck havoc on natural gas prices. We’ve explored how this abundance of gas could be leading America toward a more energy independent future. However, from an E&P point of view, those lower natural gas prices hurt their bottom lines. Overall, natural gas prices in the United States during the last year have plummeted by more than 50%. That has affected a wide range of the majors as shale gas has become a source of production for the firms.

Exxon Mobil(NYSE:XOM) — whose forward-thinking purchase of XTO Energy in 2010 made it one of the largest natural gas producers in the nation — recently highlighted its struggle with lower prices. Exxon CEO Rex Tillerson remarked that the firm was “making no money” on its natural gas assets, and the giant’s earnings reflect that. Earnings from U.S. oil and gas production tumbled by more than half during the quarter to just $678 million.

While not as dependent on natural gas as Exxon, both Chevron (NYSE:CVX) and Royal Dutch Shell (NYSE:RDS.A, RDS.B) also saw lowered profit due to falling energy prices and lowered production. Profit for the two firms fell, 7% and 13%, respectively.

Downstream a Bright Spot?

However, it isn’t all bad news for majors. Those lower prices for hydrocarbons are benefiting one sector of their businesses — downstream refining. After years of struggling, refining is finally catching a break. Cheaper oil and natural gas has helped the sector by lowering overall input costs.

Additionally, Gulf Coast refinery margins have also been lifted by rising U.S. gasoline exports. According to the Energy Information Administration, exports have run at a rate of 56,000 bpd this year — more than double the five-year average. Analysts at Edward Jones estimate that downstream was the primary cushion in Chevron’s report.